Analyst Note| Allen Good, CFA |
Shell reported an improvement in first-quarter adjusted earnings to $3.2 billion from $2.9 billion a year ago and $393 million in the fourth quarter. Each segment improved from the fourth quarter, while the upstream and chemicals segments led the year-over-year improvement. Operating cash flow, excluding working capital, was also much improved at $12.7 billion compared with $7.4 billion a year ago. Combined with divestment proceeds, Shell was able to cover the dividend and reduce net debt to $71.3 billion from $75.4 billion at year-end 2020. Shell is moving closer to its $65 billion net debt target, at which point it will introduce its shareholder distribution return target of 20%-30% of operating cash flow. It already announced a 4% increase in the dividend this year, which it plans to do annually.